Tuesday Morning Livestock Market Update

GENERAL COMMENTS:

Feedlot country should be generally quiet Tuesday as bids and asking prices remain poorly defined. Both sides are understandably wondering if Monday's board crash was just a one-trick pony or a significant sign regarding a market top. Live and feeder futures seem staged for a mixed opening tied to a combination of follow-through selling and short-covering.

Expect opening hog bids to be near steady. Packer margins are decent thanks to their ability through the month to lower the cost of live hogs at a faster rate than depreciating pork carcass value. But we may be close to reversing that margin play if processors are beginning to sense country supplies are becoming less generous. Lean futures should open moderately higher, supported by residual buying interest and short-covering.

	BULL SIDE		BEAR SIDE
1)	Judging by new showlists distributed in feedlot country on Monday, fed supplies remain very manageable. Numbers are smaller in Texas, Kansas and Colorado, but larger in Nebraska. Overall, the late-month offering looks somewhat smaller than last week.	1)	Cattle futures slammed significantly lower on Monday, reacting negatively to news of record March placement activity. If the basis continues to strengthen, feedlot managers could lose leverage in the cash trade and find it tough to stand with higher asking prices.
2)	Beef cutouts were quoted significantly higher Monday with early-week box demand described as "moderate to good."	2)	Early estimates of this weekly cattle kill are around 601,500 head, 1.1% higher than last week and 2% above last year. Chain speed seems set to steadily accelerate over the next 60 to 90 days.
3)	The cash hog trade held about steady on Monday without generating significant negotiated volume. This could be a sign that slaughter numbers are about to become more manageable.	3)	The pork carcass value has stumbled out of the gate, quoted nearly a dollar lower on Monday thanks to softer demand for hams, bellies and ribs.
4)	Frozen pork supplies as of March 31 totaled 555.05 million pounds, 3% below the prior month and 9.5% smaller than 2016.	4)	This week's hog kill should once again be substantial, possibly totaling close to 2,312,000 head, as much as 1% more than last week and 8% greater than a year ago.

OTHER MARKET SENSITIVE NEWS

CATTLE:(Capital Press) -- The prospect of resuming U.S. exports to the $2.6 billion Chinese beef import market after a 13-year hiatus is cause for excitement, but no one's getting too giddy yet, U.S. industry observers say.

President Donald Trump championed the U.S. beef industry's interest in restoring access to China during his recent summit with Chinese President Xi Jinping.

China officially lifted its U.S. beef import ban Last September, but no trade has yet taken place. The ban had been in place since December 2003, when the first U.S. case of bovine spongiform encephalitis was discovered. "We're still unable to send beef into the Chinese market because we still face technical barriers to trade," said Kent Baucus, director of international trade and market access for the National Cattlemen's Beef Association.

Resumption of Chinese beef imports was one of the action items identified during the Trump-Xi summit to be addressed during the next 100 days. U.S. and Chinese officials will be working on a path forward to resolve some of the technical barriers, including traceability, he said.

The U.S. Meat Export Federation is always encouraged when market access for U.S. beef is discussed at the highest levels of government, said Joe Schuele, USMEF vice president of communications.

"The key will be for the two sides to come to agreement on the technical requirements for U.S. beef that will be eligible for export to China," he said.

Until those requirements and the percentage of U.S. beef that will be eligible are known, it's difficult to make any projections for beef exports to China, he said.

But there's a tremendous amount of opportunity, Baucus said.

China is home to one-fifth of the world's population and a middle class that's larger than the entire U.S. population. It has become a major importer of beef from other nations, he said.

Beef industry analysts are also weighing in on the prospects.

"The rapid growth in Chinese beef imports recently provides significant export market potential for U.S. beef," Derrell Peel, Oklahoma State University livestock marketing specialist, said in this week's Cow/Calf Corner newsletter.

Chinese beef imports are projected at 950,000 metric tons, up 17 percent from 2016, and will exceed 12 percent of total global beef imports, he said.

Short-term prospects for the U.S. are likely to be modest, however, as U.S. beef establishes market share and official shipments displace unofficial shipments already reaching China through Hong Kong and Vietnam, he said.

Josh Maples, an ag economist at Mississippi State University, agrees a lot of work will be needed to establish market share.

While there is enormous potential for growth in Chinese beef consumption — forecast at 12.7 pounds per person in 2017, compared to 56.2 pounds in the U.S. — that growth is likely to be throttled by household income, he said in the Livestock Marketing Information Center's latest In The Cattle Markets report.

In addition, China's imports are mainly grass-fed beef and U.S. production is overwhelmingly grain-fed, he said.

They and other analysts also point out that traceability and the use of growth promotants are two of the issues that will have to be negotiated before trade starts.

HOGS: (newfoodmagazine.com) -- What happens when meat scientists get their hands on nearly 8,000 commercially raised pigs? They spend a year running dozens of tests and crunching numbers to arrive at research-backed management recommendations for pork producers.

"We had an opportunity to answer a lot of questions for the pork industry," says Dustin Boler, assistant professor in the animal sciences department at the University of Illinois.

Anna Dilger, an associate professor in the department, explains their approach. "The two main questions were, 'Can I measure quality in one part of the pig and predict quality in the rest of it?' And then, 'What is the true variability in pork quality out there and what's causing it?'"

The team, which also included U of I graduate students, USDA meat science researchers, and a representative from Smithfield Foods, recently published their findings in five articles.

In the first article, the team looked at correlations between loin quality and quality of the belly and ham from the same pig. In this case, quality was defined mostly by colour and tenderness. "Colour is what drives whether or not a consumer purchases a particular pork chop. It translates into what we think of as purchase intent. Colour is always number one," Boler says. "After that, we look at whether a product is tender. If it is tender enough, we think that will translate into a repeat purchase."

Unfortunately, the team found no correlation between loin quality and the quality of other cuts. "Just because a loin has desirable color and is tender doesn't mean the same animal is going to produce a good belly for bacon or a great ham for a special dinner. It didn't. Hypothesis one: scratched," Boler reports.

The remainder of the articles focused on understanding the variability in pork products -- how much variability exists, and where it comes from. For example, one of the articles focused on barrows (castrated male pigs) and gilts (young, prebred female pigs).

"We know barrows and gilts are different, but we wanted to know if they differ in how variable they are, or if one produces a more consistent product," Dilger explains. "You can deal with differences. It's harder to deal with variability."

Traits associated with fatness, such as marbling, were more variable in barrows than in gilts, but the sexes varied to approximately the same degree in terms of muscling and lean quality. Based on these results, Dilger says that barrows and gilts probably do not need to be managed differently unless producers are targeting a very specific branded product.

In another article, the researchers admit they had to channel their inner statistics geeks. They looked at every possible aspect of pork quality and tried to pinpoint the major sources of variability in the dataset, from season, production focus, marketing group, and sex to variation within individual animals. In the end, those individual differences accounted for the largest portion of the variability.

"A lot of factors turn a pig into pork," Boler notes. "In the pig's journey from the farm to his ultimate fate, a lot of things happen. Whether he got in an argument with other pigs on the truck, whether he had to walk a long or a short distance, how much rest he was given at the plant, what kind of experience he had during termination, how that carcass was cooled. All these things can independently influence the products derived from that pig."

Finding that the majority of the variability was within individual pigs and not in any particular management practice is good news for producers.

"It means the things they're doing to deal with the variability in their environment are just fine. They don't need to stop doing any of those things," Dilger says. "There are things in the industry that get picked on. One of those is pigs raised in the summer. People think, 'Ah, they're so bad, so slow.' But no, they're fine. Gilts get blamed for a lot of things, too, but in the end, they're fine. We're not going to get rid of young female pigs or the summer. I believe we're stuck with those. Understanding the variability and differences allows you to better manage the system."

The articles discussed here, "Pork loin quality is not indicative of fresh belly or fresh and cured ham quality," "Comparison of variability in pork carcass composition and quality between barrows and gilts," and "Characterisation of variability in pork carcass composition and primal quality," are published in the Journal of Animal Science. Two additional articles resulting from the project are also published in the journal.